Suppose you're comparing the single-factor model: \\( r_{i t}-r_{f t}=\\alpha+\\beta\\left(r_{m t}-r_{f t}\ ight)+u_{t} \\) against the 4-factor model: \\( r_{i t}-r_{f t}=\\alpha+\\beta_{1}\\left(r_{m t}-r_{f t}\ ight)+\\beta_{2} S M B_{t}+\\beta_{3} H M L_{t}+\\beta_{4} M O M_{t}+u_{t} \\). You find that for every stock you test, the \\( R^{2} \\) for the second model is higher than for the first model. Does that mean the second model is better? Explain your answer. Is there another way to compare the two models
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Suppose you're comparing the single-factor model: \\( r_{i t}-r_{f t}=\\alpha+\\beta\\left(r_{m t}-r_{f t}\ ight)+u_{t} \\) against the 4-factor model: \\( r_{i t}-r_{f t}=\\alpha+\\beta_{1}\\left(r_{m t}-r_{f t}\ ight)+\\beta_{2} S M B_{t}+\\beta_{3} H M L_{t}+\\beta_{4} M O M_{t}+u_{t} \\). You find that for every stock you test, the \\( R^{2} \\) for the second model is higher than for the first model. Does that mean the second model is better? Explain your answer. Is there another way to compare the two models 